The Federal Reserve's fight against inflation is going surprisingly well. Officials don't need to keep pumping the brakes on economic growth because the economy has stabilized in a comfortable equilibrium. It looks like central bankers are about to achieve a rare soft landing, curbing inflation without dragging down the economy.

      Unemployment has risen sharply over the past year, and a weak jobs report last week raised concerns that the job market could be on the verge of a serious cooling. That's worrisome because a weak labor market is often the first sign that an economy is headed for a recession.

The Fed could still pull off the soft landing it has been hoping for — the latest data Thursday showed a bigger-than-expected drop in weekly jobless claims, a small but positive development. Given the potential for things to get better, central bankers aren’t ready to panic just yet. At an event Monday, San Francisco Fed President Mary Daly said officials are watching the job market closely, trying to figure out whether it has cooled too much or is simply returning to normal after a roller-coaster couple of years.

      "We're at a point where -- is the labor market slowing substantially or is it slowing slightly?" Daly said, noting that some one-time factors could scramble the latest report, such as Hurricane Beryl and a recent influx of new immigrant workers leading to more people looking for work. "It's clear that inflation is moving closer to our goal, and it's clear that the labor market is slowing, to the point where we have to balance those goals," she said.

      The data will likely determine how aggressive the September rate cut will be. Will it be a big 0.5 percentage point cut to lower borrowing costs, as many investors expect, or will it stick with a more traditional 0.25 percentage point cut? Will it be a series of cuts, or one every other meeting?

      It’s clear that the final leg of the Fed’s fight against inflation will be more nerve-wracking than previously expected. While the economic cooling appears calm and mild, there is a clear and growing risk that policymakers wait too long to cut rates, raising the odds for a more painful emergency landing.

      Even before last week’s jobs report, policymakers were widely expected to cut interest rates at their September meeting. But after the jobs report, investors sharply increased their bets on a sharp drop in borrowing costs.

      That’s because current interest rate levels are seen as weighing heavily on the economy, and if data due in the coming weeks and months suggest that the economy is, in fact, slowing sharply, officials may want to return rates quickly to more normal levels.